Friday, October 23, 2015

Lesson #221: The Internet of Things is Coming, Hang on to Your Hats!!

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I recently completely a deep dive on the Internet of Things (IoT) space for one of my clients, and I was blown away with what I learned. If we think the consumer Internet as we know it is a big deal, IoT will become an even bigger deal, over time. Gartner predicts the IoT industry to be $1.9TN in size by 2020, and McKinsey thinks it could be as large as $6.2TN by 2025, in terms of economic impact. Yes Trillion!! Intel forecasts 15BN devices will already be connected to the internet in 2015 alone. That's a lot of demand for embedded smart modules, cloud computing, connectivity, data security, mobile apps and analytics reporting alone.

To be clear, when I talk about IoT, I am largely talking about devices connected to the internet (e.g., think a Nest thermostat), or Machine-to-Machine (M2M) technologies. IoT applications run across these primary sectors: Consumer, Commercial, Industrial, Buildings, and Government. And, get further segmented across these major industries: Retail, Transportation, Security/Safety, IT, Manufacturing, Automotive, Energy and Healthcare, to name a few. Research suggests Manufacturing and Healthcare are the largest two of these industries, in terms of potential and investment to date. From there, it drills down even further. For example, in the Security/Safety space, it splits out into Real Time Alerts, Asset Tracking, Fire Safety, Environmental Safety, Elderly/Child Protection, Power Protection, Supply Chain Visibility and beyond.

So, don't try to be all things to all people, find your sizeable niche and dominate it. Understanding a lot of big companies are also carving out their niches. As examples, in just the smart home space, niches are being created around lighting control (Hager, Legrand, Leviton, Lutron, Matsushita), access control (Honeywell, Siemens, Tyco, UTC), connected home security (Alarm.com, Bosch, Kwikset), energy efficiency (Belkin, Nest), home automation (e.g., Smart Things) and appliance control (GE, LG, Maytag, Samsung). So, even if you pick a good niche, odds are some big companies are already trying to figure out solutions in that space.

And, with this kind of next-generation market opportunity, it is attracting a lot of investment from a lot of big players. In terms of financial investors, over $1.6BN was invested into IoT companies by venture capital firms in 2014 alone. And, as for strategic players putting a lot of investment into IoT opportunties, it is an impressive list of expected companies, including Apple, AT&T, Bosch, Cisco, Eaton, Emerson, Ericsson, Fujitsu, GE, Google, Hewlett Packard, Hitachi, Honeywell, IBM, Intel, Johnson Controls, Lantiq, Microsoft, NEC, Oracle, Phillips, PTC, Qualcomm, Rockwell, Schlumberger, Schneider Electric, Siemens, Texas Instruments,Tyco and Verizon, to name just a few. So, get ready for a slug fest from a lot of well-funded companies that are also trying to get their piece of the overall IoT pie, across all industies. These will most likely be the companies you sell your successful IoT startup, down the road.

The IoT is going to change everything. In your homes, lights will automatically turn on and off as you drive your car in and out of your driveway. In buildings, fire departments will exactly know who is in the building and where they are, in case of emergencies. In corporate offices, window shades will automatically open and close based on the weather, to save on energy costs. In restaurants, food will be re-ordered based on how many times the refrigerator door is opened or closed. In logistics, police will be immediately notified if trucks veer off course. In healthcare, drones will deliver medical supplies faster than ambulances. In factories, data from parts usage will predict when a machine will break, and automatically order the part and a repairman before it does. As you can imagine, life in 2025 will look materially different than it looks in 2015, as the pace of technology change accelerates, thanks in large part to the coming IoT boom.

So, if you are a startup looking to hitch your wagon to a rising tide, grab the coattails of the coming IoT tidal wave, and hang on for the ride of your life.

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Red Rocket is your "one-stop shop" for growth: we help B2C and B2B companies with their growth strategy, execution team and financing needs. We are particularly deep in the digital technology space, but have done work across industries. We have consulted or mentored over 750 companies, to date.This blog serves as a small business executive's strategic "playbook", with actionable "how-to" lessons on a wide range of topics, including business, strategy, sales, marketing, technology, operations, human resources, finance, fund raising and more. Click the "Lessons 1-202" tab for the full list, or search by topic using the "Categories" tab.